From initial revenue of 330 million yuan to surpassing the 100 billion yuan mark last year, XCMG Group has held the top position in the construction machinery industry for many years with steady yet rapid growth.

　　Today, amid fierce competition in the construction machinery industry, XCMG Group still maintains rapid growth momentum. In the first half of this year, XCMG Group led the national industry in growth of sales volume, profit and other aspects. In March, the company shipped more than 2,000 units of exported construction machinery, more than triple the same period last year, achieving exports of over 1 billion yuan, a record high for single-month exports.

　　With the global economy still weak, what are the prospects for the construction machinery industry? How will XCMG Group achieve transformation and upgrading? For this purpose, a reporter from China Business Journal (Blog, Weibo) conducted an exclusive interview with Wu Jianglong, CFO of XCMG Group and Vice President of XCMG Construction Machinery Co., Ltd.

　　Industry Recovery Later Than Expected

　　Reporter: How do you view the current trend of the entire construction machinery industry? What impact does this have on the company's business development?

　　Wu Jianglong: Compared with the fourth quarter of last year, in the first quarter of this year, the development momentum of the entire construction machinery industry declined slightly, mainly due to fierce market competition. At present, three reasons affect the ups and downs of this industry. First, the product life cycle and the current market保有量 (installed base). Generally speaking, the short cycle is 16 to 18 months; the medium cycle is 3 to 5 years; the longest is 10 to 15 years. Moreover, many users prefer new vehicles, so after using products for 3 to 5 years, many are transferred as second-hand vehicles to markets in other countries and regions, which also creates market space for our new products. Second, when local governments change leadership, local government investment is very obvious, which is also an opportunity for the entire industry. Third, overall demand in overseas international markets remains strong, so I am optimistic about the prospects of this industry.

　　Take XCMG for example. The construction machinery industry has 16 major categories, and XCMG covers 14 of them, with a very complete product line. Sales of many of our products are rising rapidly. Overall, although the recovery of the domestic construction machinery industry is later than expected and large-scale explosive growth is difficult to reproduce, XCMG's level and strength in transformation and upgrading are gradually emerging.

　　Reporter: XCMG Group now attaches increasing importance to global procurement and sales. What is XCMG's layout and strategy in overseas markets? Do different countries have different strategies?

　　Wu Jianglong: As early as 1998, when XCMG products first participated in an international construction machinery exhibition in physical form, XCMG began its overseas strategy. Internationalization usually has three methods. One is to find product agents abroad and establish sales networks; the second is to build factories overseas, which is more solid than simply finding agents; the third, between these two, is to acquire related enterprises and use their sales networks to enter local markets. XCMG has all three methods, and we have a comprehensive layout. For example, last year XCMG Group acquired the German construction machinery company Schwing. This established company leads globally in technology, but its shortcomings are also obvious: it is limited to concrete machinery, while XCMG has a complete product line but lacks high-end concrete machinery products and technology. After combining, the two complemented each other's strengths, and the two sides also established a joint venture in Europe.

　　At present, XCMG has factories in various European countries, Brazil, Poland and elsewhere. Chinese enterprises going global should pay attention to two aspects: one is to build their own brands and capabilities; the other is to go global in line with the national strategy.

　　Reporter: You once said that in the coming years, about 50% of innovative enterprises will fail within 5 years, and about 70% of enterprises supported by venture capital will go bankrupt or perform poorly. Why do you hold this view? Also, as a CFO, how do you exert influence in the company's development process?

　　Wu Jianglong: This is mainly viewed from the perspective of finance and operations. At present, in many enterprises, management holds two completely different views. One is: I will never build a century-old store, because building a century-old store means missing out on many policies. For example, some enterprises, in order to cater to certain policies and subsidies, invest in setting up impractical new projects and so-called innovative products, thereby obtaining more than 1 billion yuan in subsidies, simply for the sake of subsidies. But what we want to build is a century-old store, so our approach is different. We cannot align everything with subsidies. XCMG values long-term strategy more, and every time we set up a new project, we examine whether it can deliver benefits for the overall business in the future.

　　From a financial perspective, whether an acquired enterprise has value is determined by using the income approach to determine the acquisition value. We mostly forecast whether the revenue ratio generated by this product in future competition meets our requirements, and of course there are also comparison methods. In the acquisition process, we also have a dedicated vice president to follow up specifically on acquisition matters to ensure that we acquire good projects.

　　Finance Is a Core Strategy

　　Reporter: How can the company's financial condition be improved to achieve short-, medium- and long-term financial goals?

　　Wu Jianglong: First, from the perspective of strategic goals, financial goals are closely linked to corporate strategy. In terms of long-term goals, finance is a core strategy. First is investment strategy, followed by financing strategy. Usually, prudent, aggressive or neutral financing methods are adopted according to different situations. In the long term, we will arrange some eight- to ten-year financing plans and issue some bonds and stocks; in the short term, there will be some ultra-short-term financing and other forms of plans.

　　For example, the recently established XCMG Group Finance Co., Ltd. has received approval to open from the China Banking Regulatory Commission. This finance company will also play a huge role in the group's overall finances in the future. We now adopt a market-oriented strategy for financing subsidiaries.

　　We also provide different levels of support to subsidiaries. For example, for core subsidiaries with good profits, we can directly provide them with the full financing quota at very low interest rates; for some subsidiaries, we lend only part and they raise the rest themselves; and marginal enterprises rely on their own financing. This model is relatively common in multinational companies, and we are also establishing this concept: poorly performing subsidiaries and projects should exit the market at an appropriate time in a market-oriented way.

　　Reporter: What are XCMG Group's service needs and usage regarding financial institutions and banks?

　　Wu Jianglong: In 2007, the overall market funding environment was very tight. I once proposed a "grain-grabbing plan," which was a plan for how to cooperate with financial institutions. At that time, we chose three state-owned banks, two joint-stock banks and two foreign banks. Foreign banks mainly allocate some overseas resources, joint-stock banks mainly offer flexible mechanisms, and state-owned banks are traditional partners.

　　Among them, foreign banks mainly handle mergers and acquisitions and hedging; Chinese banks mainly handle working capital loans and settlement, bill exchange, domestic guarantee and overseas lending, etc. Some banks are very good at mortgages, some are good at dealer supply chains, and each bank has its own strengths, all of which we use.

　　At present, our finance company has been established, and there will be more banks to cooperate with in the future. Over the years, the relationship between banks and XCMG has been stable and good, which is also one of the reasons XCMG has been able to develop rapidly. On the one hand, I tell financial institutions that I never oppose "snobbishness," because cooperation between big banks and big enterprises is a match of equals, but what I oppose is some financial institutions "having an affair," meaning that we have signed strategic agreements, and if there is a funding squeeze, you must support me first. For example, in 2008, several banks ignored our requirements and turned to some enterprises with higher interest rates but also greater risks, and later we eliminated them. On the other hand, I often tell my team: why do bankers visit us every day? It is because we operate steadily and well, so integrity is definitely the most important thing.